Agricultural Economics Exam 1

What does Veblen Good mean

Price increases, quantity increases

What does gilfen good mean

Price decreases quantity decreases

how is profit measured?

Total revenue - total cost

What are perfect substitutes

Can replace one another completely

T or F: imperfect substitutes can replace one another completely

False: only to a certain degree

What are perfect commodities

Used in the same proportion

T or F: in a perfectly competitive market there are many sellers

True

T or F: in a monopoly market there are a few sellers

False: only one

T or F: in a imperfectly competitive market there are a few sellers

True

What is the term used to describe the sum total of all operations involved in the manufacture and distribution of farm supplies

Agribusiness

What type of economics describes cause and effect

Positive economics

What type of economics describes what ought to be

Normative economics

What is the term used to describe the process used to control or direct a situation

Management

T or F: agriculture is a homogenous sector/industry

False: not homogenous

In vertical integration what increases and what decreases

Market power increases and competition decreases

What does GNP stand for

Gross national product

What is the term used to describe the value of all finished goods and services produced in the economy of a country in a given time period by all businesses headquartered in this country weather the goods and services were produced in the US or overseas

GNP

What does GDP stand for

Gross domestic product

What is the term used to describe total value of final goods and services produced within the US in a given time period by either foreign or domestic resources

GDP

What is the equation for GDP

Consumption (C) + Savings (s) + Investement (I) + govt. expenditure (G) + export (X) - import (M)

In a resource market, who sells and who buys

Sellers are households, businesses are buyers

In a product market who sells and who buys

Businesses sell and households buy

What is another name for the product market

Commodity market

What policy influences economic activity in the system through governments actions in managing the money supply (MS) and rate of interest ( r)

Monetary policy

What policy influences economic activity in the system through governments actions in managing the government expenditure (G) and taxes (T)

Fiscal policy

What are some examples of government expenditure

Social security benefits or stimulus checks

What is happening during recession

Overall demand is low

What is the term used to describe the significant decline in the economic activity that lasts for more than a few months and affects industrial production, employment, real income, and wholesale retail trade

Recession

What does the government want to do during recession

Implement policies to increase overall demand in the market/economy

What type of policies will be implemented during recession

Expansionary

What is increased and what is decreased in an expansionary fiscal policy

Government expenditure is increased and taxes are decreased

What is increased and what is decreased in an expansionary monetary policy

Money supply is increased and rate of interest is decreased

When the government is using contractionary monetary and fiscal policies what are they trying to do

Lower overall demand

When are contractionary polices used

During inflation

What is the term used to describe the rate at which the general level of prices for goods and services rise and consequently the purchasing power of the currency falls

Inflation

T or F: consumers do not spend everything that they earn on goods and services

False: they do

T or F: more is preferred than less

True

What is the term used to describe the satisfaction that a consumer gets from consuming a good or service

Utility

What is the term used to describe the additional satisfication a consumer gets from consuming each additional unit of a good

Marginal utility

How is marginal utility calculated

Change in total utility / change in the quantity of goods consumed

What law states as an individual consumes additional units of a good, ceteris paribus, the amount of satisfaction from each additional unit of that good will decrease

Law of diminishing marginal utility

T or F: ordinal utility is quantitative

False it is qualitative

What is ordinal utility

Measurement of utility by its order or ranking

What is the quantitative approach to express utility

Cardinal utility

What tool is used to measure how consumers choose among 2 different bundles of goods

Indifference curve

What does it mean when the indifference curve is convex to the origin

Imperfect substitutes

How does an indifference curve slope

Downward to the right

T or F: indifference curves intersect

False: they do not

What happens to the marginal rate of substitution as we move along the indifference curve

It decreases

How does a rational consumer want to move on the indifference curve

Upward and to the right

Away from the origin on an indifference curve what happenes to utility

It increases

What is the term used to describe the rate at which one good is substituted for another good while maintaining the same level of unity

Marginal rate of substitution

How is the MRS calculated of good 1 for good 2

Total Change in good 2/total change in good 1

What is the slope of the indifference curve

MRS

As we move from top left to bottom right on the indifference curve what type of values are we moving from in terms of MRS

Large negative MRS values to small negative MRS values

What are the 2 extreme forms of subsection between goods

Perfect substitutes and perfect compliments

What does the indifference curve look like for perfect substitutes

Straight line

What does the indifference curve look like for perfect compliments

Right angle

What are perfect compliments

Good that are only consumed in fixed proportions

What shows all possible combinations of goods that a consumer can purchase with a given amount of money

Budget line

How is the slope of the budget line found

- price of good 1/ price of good 2

What type of line is the indifference curve

Equal satisfaction line

What type of line is the budget line

Equal affordability line

When is utility maximized with the indifference curve and budget line

When the indifference curve is tangent to the budget line

What occurs when the ratio of the marginal utilities for 2 goods equals the ratio of the price of the 2 goods

Consumer equilibrium

What curve shows the relationship between price of a commodity and quantity demanded for an individual consumer

Demand curve

What curve shows the quantities of a good that all consumers will buy at different prices for that good at a point in time

Market demand curve

How is the demand curve sloped

Negatively

The economics area that deals with output, employment, incomes, and other activities for the entire economy is known as

Macroeconomics

T or F: fiscal policy involves changing taxes and government expenditure

True

What does monetary policy involve changing

Money supply and interest rates

T or F: during recession the goal of the government will be to increase overall demand in the economy

True

T or F: the monetary policy involves changing money supply and the rate of interest

True

What type of policy will the government adopt if the economy is suffering from recession

Expansionary

“The unemployment rate in the US should be zero percent” this statement is an example of

Normative economics

T or F: demand being constant, the availability of a commodity in larger proportion will drive up the price

False